On Tuesday, Morgan Stanley (NYSE:MS) maintained its Equalweight rating and $50.00 stock price target for Celsius Holdings (NASDAQ:CELH). The firm observed that Celsius's year-over-year sales growth had decelerated, with a modest 4% increase in the last two weeks ending August 24, 2024. Despite a slight uptick in market share to 9.8%, up from 9.6% two weeks prior, this figure is still lower than the 10.4% recorded in early May.
Celsius's total distribution points (TDP) growth remained stable at approximately 40% year-over-year, but product velocity—a measure of sales speed—declined slightly. The recent two-week period saw a 25% decrease in velocity compared to a 24% reduction in the preceding two weeks, and a low-20s drop in July. Additionally, the percentage of sales on promotion for Celsius increased both sequentially and year-over-year.
Morgan Stanley's stance remains unchanged since its post-second-quarter earnings note, where estimates and the price target were lowered. The firm does not anticipate a significant catalyst for Celsius until there is a positive shift in scanner data trends.
While there is potential for Celsius to achieve a mid-teens market share of the U.S. energy category over time, Morgan Stanley also recognizes the risk of stagnant market share growth due to heightened competition and the possibility of subdued category growth for several quarters.
In other recent news, Zevia PBC announced the appointment of Alexandre Ruberti to its Board of Directors, a move expected to significantly contribute to the company's growth and profitability. Ruberti's two decades of experience in consumer packaged goods, including leadership roles at Red Bull and Waterdrop®, are anticipated to be valuable assets to Zevia's strategic growth.
On a different note, Celsius Holdings has been the focus of financial discussions following its Q2 performance. The company reported a 23% increase in total revenue, setting a record at $402 million, and a 30% rise in international revenue to $19.6 million. Despite industry challenges, Celsius maintained its category growth leadership and expanded its shelf presence.
TD Cowen revised its price target for Celsius's shares, downgrading it from $68.00 to $50.00, while maintaining a Buy rating. The firm's revised projection for Celsius's 2024 sales growth stands at 19%, reflecting concerns about broader weakness in the Energy category consumption and increased promotional activities by competitors. However, Celsius remains committed to investing in marketing and sales to support retail customers and drive growth.
These are among the recent developments for both Zevia and Celsius Holdings, showcasing their strategic moves and financial performance in the face of industry challenges.
InvestingPro Insights
As Morgan Stanley maintains its stance on Celsius Holdings, a glimpse into the company's financial health through InvestingPro data and tips may offer additional context for investors. Celsius Holdings boasts a stronger liquidity position, as it holds more cash than debt on its balance sheet, which could be a reassuring sign for investors concerned with financial stability (InvestingPro Tip #0). Furthermore, the company's liquid assets surpass its short-term obligations, indicating an ability to cover its immediate liabilities (InvestingPro Tip #5).
However, it is important to note that six analysts have revised their earnings expectations downwards for the upcoming period, suggesting that investors might need to temper their short-term expectations for the company's performance (InvestingPro Tip #1). Moreover, while CELH is trading at a low P/E ratio relative to its near-term earnings growth, it is also trading at high earnings, EBITDA, and revenue valuation multiples, which may indicate a premium pricing of its shares (InvestingPro Tips #2, #3, #7, #9).
InvestingPro data reflects these sentiments with CELH trading near its 52-week low and having experienced a significant price drop over the last three months (InvestingPro Data). This could either signal a buying opportunity for value investors or a note of caution for those wary of volatility (InvestingPro Tip #6, #8). For those looking for more insights, there are additional tips available on InvestingPro, providing an in-depth analysis of Celsius Holdings' financial metrics and future prospects.
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